Remember Clinton's Booming Economy? Remember His Comparatively Restrained Government, Too
Tonight, former President Bill Clinton will make the case for Barack Obama at the Democratic National Convention. The gist of his message will be that President Obama has gotten off to a good start cleaning up the economic mess made by Republicans during the Bush era. Clinton has the credibility to make this case mostly because during his presidency the economy was undeniably strong. As Dylan Matthews charts at The Washington Post, unemployment dropped from above 7 percent when Clinton took office to below 4 percent when he left; economic growth averaged 3.8 percent, better than the majority of presidents after World War II; core inflation held steady around 2.6 percent; income inequality increased, but so did median income. Good times were had by all.
That's the economic picture. But presidents don't have direct influence over those metrics; a commander in chief can't simply push a button to increase economic growth or decrease unemployment. Presidents do, however, have influence over the government's finances. And under Clinton's watch, they also looked pretty good. Yes, marginal tax rates were higher. But the size of government was kept in check relative to the rest of the economy. Total federal debt levels dropped as a percentage of America's total economic output; annual budget deficits were almost nonexistant — by far the lowest of any president in the post-war era; by the end of Clinton's presidency, federal spending accounted for just 18.2 percent of the economy. In 2011, by contrast, federal outlays equaled 24.1 percent of the nation's total economic product.
In order for Clinton to make a case that Barack Obama can return us to the boom times of the 1990s, he needs to make a case that Obama would return us to the comparatively restrained spending, debt, and deficit levels of the 1990s. (This is not to idealize the Clinton years. Government's growth was masked in part by the tech boom, which is why I emphasize its size relative to the rest of the economy.)
Liberals will no doubt argue that we should also return to Clinton-era marginal tax rates. But that's not enough. As Ezra Klein shows, analyses from groups on both the left and right of the political spectrum make clear that the great majority of the $12 trillion increase in debt that's occurred since Clinton left office come from spending — spending on wars in Iraq and Afghanistan, on the build-up of defense spending, on Medicare Part D, on economic recovery measures of dubious value, on the ever-expanding interest payments on our ever-expanding debt.
But it will be tough for Clinton to make that case. Obama has run record deficits and piled on record debt. He has shown no interest in limiting the size and scope of government, no desire for what most Americans want, which is a government that does less but does it better. Speakers at this week's Democratic convention have barely mentioned public debt levels, while calls for greater spending — sorry, investment — have been nearly as frequent as vacant promises to move the country forward. The question, of course, is forward into what? Even greater levels of spending and debt? In his speech tonight, Clinton will ask people to recall the thriving economy that accompanied his presidency. But what people should also remember is the relatively restrained government that went along with it.